Insurance group Beazley sees profits shrink by 48%
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Beazley’s profit shrinks 48% as base rate hikes lead to investment losses for Lloyd’s of London insurer
- Beazley provides insurance against catastrophic events such as natural disasters
- Beazley’s gross written premium volume grew 14% to $5.3 billion
- Growing interest in cybersecurity drove some of the increase in premiums
Lloyd’s of London underwriter Beazley has almost halved its annual profit after interest rate hikes led to losses on fixed income investments.
The blue-chip company, which provides insurance against catastrophic events such as natural disasters, said profits fell from $308.7m in 2021 to $160.8m (£134.6m) last year.
Central banks worldwide have raised interest rates in response to high inflation, driving up bond yields and ultimately creating a $179.7 million investment shortfall in Beazley’s fixed-income portfolio due to mark-to-market accounting losses.
Declining earnings: Lloyd’s of London underwriter Beazley said earnings fell from $308.7 million in 2021 to $160.8 million last year, largely due to rate hikes
However, the combined ratio – a key indicator of insurer profitability – improved by four percentage points for 2022 to 89 percent. Any number below 100 percent indicates profit.
Earnings were boosted by an improved claims ratio, despite the company suffering $120 million in expected losses from Hurricane Ian, and further payouts related to the escalation of the war in Ukraine.
At the same time, gross written premiums increased 14 percent to $5.3 billion, with the Maritime, Accident and Political Risks (MAP) division posting 23 percent growth.
Premiums in the group’s cyber risk business also increased by 40 percent as the trend towards digitization increased the demand for insurance protection against hacking from both large and medium-sized companies.
Although the number of new cyber activities started to slow down last year, Beazley predicts continued strong growth in demand for such services, particularly from large companies outside the core US market.
To further expand its cyber reach, the company conducted a share placement last November that raised approximately £350 million and two months later launched the insurance industry’s first-ever cyber catastrophe bond.
Chief executive Adrian Cox said the bond will “bring new capital into a cyber market that needs to grow rapidly over the next decade to meet corporate demand.”
Regarding the company’s outlook for 2023, he said net premiums are expected to grow faster than gross premiums at a rate of the mid-20s, while the combined ratio is expected to remain in the “high 80s.”
Cox added, “While significant geopolitical headwinds remain, I believe we are in a great position to grow our business sustainably.”
Beazley shares had fallen 4.8 percent on Thursday afternoon to 628.5 pence, making it the biggest faller on the FTSE 100, which the company only entered in December alongside asset manager Abrdn and engineering firm Weir Group.